Tuesday 20:30, the U.S. CPI data for March was released, the quarterly CPI monthly rate recorded 0.6%, better than the expected 0.5%, also higher than the previous value of 0.4%, more than a new high in July last year; quarterly CPI annual rate recorded 2.6%, a new high in August 2018.
After the release of the U.S. CPI data, spot gold rallied after a short move lower by more than $3. It has now returned to the $1,740 mark, with spot silver up more than 2%; the U.S. 10-year Treasury yield was 2 basis points lower in the short term, now at 1.68%; the U.S. dollar index fell back after rallying higher, with a volatility of 30 points in 15 minutes, while non-U.S. currencies were collectively higher; U.S. stock futures were higher in the short term, with the Nifty futures up 0.35%. Dow and S&P 500 futures narrowed losses.
Institutional commentary said the U.S. CPI in March hit its biggest gain since 2012, further evidence that inflationary pressures are increasing as the economy recovers and demand strengthens.
Zero Hedge analysts wrote that the biggest driver of this increase was higher energy prices: Over the past 12 months, the energy index rose 13.2%, with the gasoline index up 22.5%, while the natural gas index rose 9.8%, the electricity index rose 2.5% and the fuel index increased 20.2%.
In terms of subdivision data.
The housing index rose 0.3% in March, while the rent index increased 0.2%.
The motor vehicle insurance index increased for the third consecutive month, rising 3.3 percent in March.
The leisure and recreation index and the home improvement and business index increased 0.4 percent in March.
The used car and truck index also rose 0.5 percent
The personal care index rose 0.6 percent.
However, the new car price and communications indexes were flat, the apparel index even fell 0.3%, and the education index declined 0.2%.
In fact, the market may also have expected a higher CPI figure in March. As Golden 10’s previous article also pointed out, due to the U.S. government’s unique way of calculating inflation indicators (half of the data used to calculate CPI is now estimated based on last year’s values, which were once plummeted in March and April last year due to the epidemic blockade), it is almost certain that March data will rise, a phenomenon known as the base effect (base effect) This phenomenon is called the base effect.
Because of the base effect, the market may not believe that the CPI reflects the real situation, you can pay attention to the March PCE data released at the end of this month, which will serve as another reference for inflation data.
Regardless of the data, this may not stop the rising inflation expectations in the market. A survey released by the New York Fed on Monday showed that U.S. consumers raised inflation expectations for the fifth consecutive month in March, with one-year and three-year inflation expectations both hitting nearly seven-year highs.
For some time, prices for certain commodities may continue to rise, even sharply, as the economic recovery gets back on track. Some manufacturers have already indicated that they plan to pass these costs on to consumers due to the significant increase in material costs. In addition to commodities, with the widespread availability of vaccinations, previously suppressed demand from U.S. households for services such as airlines and travel will see a violent rebound, which will push up these prices. And with the latest stimulus package, Americans are ready to spend.
To some extent, rising inflation is welcome news for the Fed, but the Fed is not expected to turn hawk on this.
Even in 2019, at the tail end of the longest-ever U.S. economic expansion cycle, inflation has yet to reach the 2% target set by the Fed. But Fed Chairman Jerome Powell spoke at his January press conference about how the base effect of inflation data could lead to a brief burst of data that puts upward pressure on inflation, adding.
“In any case, we don’t think they’re durable and don’t expect the price increases to last very long.”
Tom Simons, an economist at Jefferies Group, said this is the first month we’ve seen the base effect drive year-over-year growth, but market participants are already aware of its impact and the Fed has said it will look closely at temporary inflationary factors, so the Fed is not expected to respond hawkishly to it.
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